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Seasons, savings and GDP

  • Hernando Zuleta

    ()

The industrial revolution and the subsequent industrialization of the economies occurred fi rst in temperate regions. We argue that this and the associated positive correlation between absolute latitude and GDP per capita is due to the fact that countries located far from the equator suffered more profound seasonal fluctuations in climate, namely stronger and longer winters. We propose a growth model of biased innovations that accounts for these facts and show that countries located in temperate regions were more likely to create or adopt capital intensive modes of production.The intuition behind this result is that savings are used to smooth consumption; therefore, in places where output fluctuations are more profound, savings are bigger. Because the incentives to innovate depend on the relative supply factors, economies where savings are bigger are more likely to create or adopt capital intensive technologies.

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File URL: http://repository.urosario.edu.co/bitstream/handle/10336/10936/4592.pdf
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Paper provided by UNIVERSIDAD DEL ROSARIO in its series DOCUMENTOS DE TRABAJO with number 004592.

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Length: 45
Date of creation: 31 Jan 2008
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Handle: RePEc:col:000092:004592
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